The United States is set to implement a new wave of tariffs targeting imports from China, Canada, and Mexico. Beginning March 4, a 10% tariff will apply to goods from China, doubling the effect of an earlier 10% levy introduced in February. In a strategic move to protect domestic industries and generate additional revenue, President Donald Trump also plans to impose a 25% tariff on imports from Canada and Mexico. However, tariffs on Canadian energy products will be slightly lower at 10%. Although originally slated for March 4, these tariffs on Canada and Mexico have been delayed for 30 days.
U.S. companies and industry groups have voiced concerns that these tariffs could lead to increased consumer prices. While some businesses may absorb part of the tariff costs to mitigate the impact on consumers, others will likely pass the costs along, potentially affecting prices of furniture, sneakers, and toys due to the Chinese tariffs.
"Ultimately, the cost of tariffs will be paid by us, the consumer. [Americans will] be buying things at higher prices than they otherwise would." – George Ball
Tariffs function as a tax on imports, but they are not directly paid by the exporting countries. Instead, the burden often falls on U.S. businesses and consumers. The stock markets and corporate supply chains experienced temporary disruption following the initial February tariff announcement. Nonetheless, the consumer economy remains resilient enough to absorb some increased costs.
"When President Trump put them into place, inflation was at such a low level that, yes, they did impact the consumer, but it wasn't as noticeable as where we're starting today," – (no attribution)
In the construction industry, tariffs on lumber and other building materials could elevate construction costs and discourage new development. This situation may result in higher home prices for consumers.
"Tariffs on lumber and other building materials increase the cost of construction and discourage new development, and consumers end up paying for the tariffs in the form of higher home prices." – Carl Harris
The purpose of these tariffs is twofold: to generate revenue for the U.S. government and to shield domestic industries from foreign competition. During his first term, President Trump implemented similar tariffs, which mostly went unnoticed by consumers due to low inflation levels at that time. However, with current economic conditions, the impact might be more palpable.
"It's very possible that they might do what they did during the Trump 1.0 administration. And that is, bear a fair amount of the burden of the tariff." – Jeffrey Roach
U.S. businesses boast flexible supply chains capable of absorbing some tariff costs. This flexibility may lessen the immediate impact on consumer prices.
"The only thing for the consumer to do is to try to be a savvy shopper. Tariff costs don't pass through immediately, and they're not always passed through 100%." – Jeffrey Roach
Despite potential price increases in certain sectors, many U.S. consumers might not immediately feel the pinch due to these new tariffs. The gradual pass-through of costs means that some businesses will continue to navigate ways to minimize price hikes.